Background- Mr. A originally buying from China and selling to France using his own French company as the middle trading firm (F Ltd);
- Trading profit of Euro 100,000 is subject to French tax rate – can be as high as 40% ;
- Mr. A controls the business remotely – no need to maintain operation base in China or France.
New arrangement- Mr. A setup a Hong Kong company, H Ltd;
- H Ltd becomes the middle trading company – buying from China and selling to France;
- Goods still shipping directly from China to France;
- Selling and purchase at same price as before;
- Location of operation – Mr. A still operating the business – without maintaining operating office in Hong Kong, China and France.
Benefit- Profit of Euro 100,000 will be profit of H Ltd;
- As H Ltd maintains only register address in Hong Kong, but not operating office. And also fulfilling offshore operation test, Hong Kong tax department (Inland Revenue Department) (IRD) approves the “non-HK source” application;
- There is saving of 40% in profits tax.
| Important : Overall Tax Position |
Mr. A still needs to fulfill personal income tax filing to French government – in order to assess overall tax saving scenario. |
| Important : Offshore operation tax exemption in HK |
H Ltd should fulfill operation test, which include below : - No operation office maintaining in HK (this is different from register address);
- No staff hired and working in HK;
- No customers / clients from HK;
- No suppliers from HK;
- Income contract not negotiated or concluded in HK;
- Goods not entering HK
- trans-shipment is fine;
- maintaining continuous cargo stock in HK is not fine.
|
